When Will Desert Mountain Energy Corp. (CVE:DME) Become Profitable?

We feel now is a pretty good time to analyse Desert Mountain Energy Corp.'s (CVE:DME) business as it appears the company may be on the cusp of a considerable accomplishment. Desert Mountain Energy Corp. engages in the exploration and development of oil and gas, helium, hydrogen, condensate, and mineral properties in the Southwestern United States. The CA$28m market-cap company’s loss lessened since it announced a CA$12m loss in the full financial year, compared to the latest trailing-twelve-month loss of CA$9.7m, as it approaches breakeven. The most pressing concern for investors is Desert Mountain Energy's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Desert Mountain Energy

Desert Mountain Energy is bordering on breakeven, according to some Canadian Metals and Mining analysts. They anticipate the company to incur a final loss in 2024, before generating positive profits of CA$200k in 2025. So, the company is predicted to breakeven just over a year from now. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 120% is expected, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

Given this is a high-level overview, we won’t go into details of Desert Mountain Energy's upcoming projects, though, keep in mind that by and large a metal and mining business has lumpy cash flows which are contingent on the natural resource mined and stage at which the company is operating. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.

One thing we’d like to point out is that Desert Mountain Energy has no debt on its balance sheet, which is quite unusual for a cash-burning metals and mining company, which usually has a high level of debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.

Next Steps:

There are key fundamentals of Desert Mountain Energy which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Desert Mountain Energy, take a look at Desert Mountain Energy's company page on Simply Wall St. We've also put together a list of essential aspects you should further research:

1. Historical Track Record: What has Desert Mountain Energy's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Desert Mountain Energy's board and the CEO’s background.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.